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Hi,
When computing for the present value of the future sales in sensitivity analysis, do we compute for contribution first then deduct present value of the tax payable or we simply do pv of the sales revenue and deduct the pv of tax? BPP used the first approach and KAPLAN used the later. I’m confused which one to take.Thanks, John.
ooh i see the difference now. sales/selling price, use sales revenue. sales volume, use contribution. i just tried to compare the answers from the two books. hope this is true.
It depends on whether you are calculating the sensitivity of the sales price or the sensitivity of the sales volume.
If it is the sales volume then it is what you describe as the BPP approach. If it is the sales price, then it is what you describe as the Kaplan approach.
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